Observations on economics, the academy, the wider world, and things that run on rails.

13.4.15

A FALSE ECONOMY.

I must repeat an observation I made last fall (and before I saw the Norfolk Southern meltdown first-hand.)

Put another way, the railroad spent the last quarter century cutting employees. And we have to learn this lesson every time an economic recovery shows staying power: railroads melt down, stores encounter spot shortages of stuff, customer service sucks.

On April 7, a $41 million lawsuit was filed by former Cold Train executives against Burlington Northern Santa Fe Railway (BNSF) for damages that put the refrigerated rail car service out of business in August.

Daniel Appel, a partner at the Wenatchee law firm Foreman, Appel, Hotchkiss & Zimmerman PLLC, which is representing Cold Train, told The Produce News that Cold Train’s business plan was based on a 2009 agreement with BNSF to provide special 72-hour service from the heart of Washington’s fruit-producing area to Chicago.

Appel said Cold Train spent $12 million dollars to design and built refrigerated rail service to fulfill the service to Washington shippers. Apples and pears were the primary fresh commodities carried by Cold Train.

That is, until the Dead Freight coming out of the Powder River Basin, the Bakken oil field, and the ethanol breweries got in the way.

A Cold Train press release on April 7 indicated that “the shutdown of Cold Train was caused by a significant slowdown in BNSF’s service schedules on its northern corridor line beginning in the fall of 2013 because of increased rail congestion as a result of BNSF hauling larger volumes of oil and coal from the Northern Plains region. In fact, from November of 2013 to April of 2014, BNSF’s on-time percentage dramatically dropped from an average of over 90 percent to less than 5 percent. To makes matters worse, in April of 2014, BNSF abruptly sent out an announcement to customers indicating that it would be immediately reducing intermodal train service from Washington state to only one train a day from Washington state (instead of two), and that transit time would be twice as slow (three days slower) from Seattle/Quincy to Chicago.”

Humph. The Great Northern Railway used to be able to get the silk trains through without the cocoons being spoilt, or to bring Theodore Roosevelt east after a hunting trip, using good old timetable and train order operation and steam locomotives.

The Cold Train operators are suing the railroad for damages. That option might not be possible for all customers inconvenienced by downsizing, but there have to be other tactics, including written complaints -- the 'phone trees that pass for consumer service these days are inconvenience epitomized -- to keep the managements in such a state that adding more capacity is less painful.